In 2010, in a widely-cited paper titled "Growth in the Time of Debt", Harvard economists Kenneth Rogoff and Carment Reinhart made the widely-cited claim - with supposedly supporting analysis - that high debt countries are prone to significant declines in economic growth. Macroeconomic policymaking follwed suit, pushing austerity on the US and other countries, fearing dire economic consequences. Turns out that Rogoff and Reinhart were dead wrong, and their intentions less than sincere.
UPDATE: the Huffington Post just released this article talking about MORE "mistakes" made by Reinhart and Rogoff.
As one of the most cited statistics in policy and tax debates that have followed since then, many conservatives, such as Paul Ryan, warned that this approaching 90% debt/GDP threshold would wreak havoc on this country and growth. Based on this claim, they pushed massive austerity cuts on this country, remained intractable in fiscal debates, brought the country over the fiscal cliff, slashed funding for scores important government programs, and even got the country's own credit rating downgraded. And the hard line that they held was somewhat understandable, considering the dire economic consequences posited by Rogoff/Reinhart if this threshold was reached.
For years after the paper was published, Rogoff and Reinhart refused to release this analysis, even when no other economists were able to approximate their results. But finally, researchers from the University of Massachusetts, Amherst were able to get a copy of the relatively simple spreadsheet, and in a paper titled "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff," they proved the two economists to be dead wrong, and devilishly so.
For Rogoff and Reinhart didn't just make simple computational errors; rather, looking through the analysis, they made devious and calculated exclusions of data, clearly trying to produce an outcome rather than an unbiased analysis. As outlined in this article, they selectively excluded targeted historical data that they knew would undermine their intended conclusion, weighted this data with worse data to replace this missing information, and then excluded countries that would undermine the result. Their original paper concluded that for countries in the 30% or less, 30-60%, 60-90%, and 90%+ debt/GDP ratio categories, growth was 4.1%, 2.8%, 2.8%, and -0.1%, respectively, surely sounding alarm for any country approaching the last category. But with the errors fixed, there was only one change in this conclusion, albeit a significant one; for the 90%+ debt/GDP category, it changes from -0.1% to 2.2%, undermining Rogoff and Reinhart's conclusion of negative economic growth.
And ignoring the blatant miscalculations for a moment, the question must also be asked: what made them do this analysis in this bizarre fashion, arranging countries into these particular categories and choosing 90% as the cutoff, even though many countries in this analysis far exceed this ratio? Unfortunately it seems more than mere coincidence that when the paper was published the US was considering extended fiscal projections hovering close to the 90% debt/GDP ratio, and by choosing 90% as the final cutoff, Regoff/Reinhart were able to lump Greece, Cyrpus, and Portugal in with with more responsible, higher-debt countries, to exaggerate the threat of catastrophe. Except, of course, when you correct the analysis, even this 90%+ catch-all category isn't that bad.
At minimum, these mistakes are tantamount to gross incompetence, which are surely grounds for dismissal in any academic or non-academic institution. But considering their very targeted exclusion and replacement of data, Rogoff and Reinhart were clearly trying to manufacture a result that an unbiased analysis wouldn't otherwise produce. This clearly undermines the moral and ethical guidelines that all academic professionals - especially economists - must abide by.
With their incompetent and corrupt behavior, Rogoff and Reinhart have no place in academia. Their actions - originating from a single, faulty spreadsheet - had wide reverberations on macroeconomc policymaking throughout the world. As one of the top institutions for the study of economic policy, Harvard should immediately fire both Kenneth Rogoff and Carmen Reinhart.
For further research:
- Harvard University
Fire economists Kenneth Rogoff and Carmen Reinhart. Incompetence and corruption have no place at Harvard, or any academic institution.
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